I expect pretty much all the major currencies will continue to gain on the USD in the long term. I will watch with interest what the Asian powerhouses do with their massive USD holdings. How long will we talk about the USD being the world reserve currency?

No matter how much statistical fudging the US powers that be expect us to swallow, its going to be interesting times ahead.

Having said that, I would hate to see a collapse. Not good for anyone, unless youre on the short side.

I expect pretty much all the major currencies will continue to gain on the USD in the long term. I will watch with interest what the Asian powerhouses do with their massive USD holdings. How long will we talk about the USD being the world reserve currency?

No matter how much statistical fudging the US powers that be expect us to swallow, its going to be interesting times ahead.

Having said that, I would hate to see a collapse. Not good for anyone, unless youre on the short side.

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Possibilities of a Bounce in the US Dollar - by Kathy Lien -11-27-06

US Dollar – History is prone to repeating itself, but it failed to do so this morning when the US dollar continued its slide against the majors. We had revisited 2004 in Friday’s Daily Fundamentals and pointed out that a similar Thanksgiving rally in the Euro consolidated on the Monday following the holiday. However the weakness in the US dollar was so dominant this time around that the Euro hit yet another year to date high this morning. There was no data released today, but there are a tremendous amount of event risk tomorrow including a speech by Bernanke and Moskow along with durable goods, consumer confidence and existing home sales. Tomorrow’s data has a greater chance of coming out stronger than weaker. Even though durable goods is predicted to drop by 4 percent, the ex transportation component is predicted to rise. Consumer confidence should have also held on as suggested by the strength of retail sales over the Thanksgiving weekend. Aggressive spending is usually characteristic of happy consumers and given that the bulk of sales was concentrated in the big ticket items such as electronics, there is no way that consumers could be shelling out the big bucks if they felt uncertain about their finances. Furthermore, the UBS-Gallup poll which we can use as a leading indicator for Consumer Confidence even though it is delayed by a month confirms the possibility of a strong reading. The Gallup index jumped from 79 to 93 in October, reaching the highest level since 2004. Consumer confidence actually fell during that time, which means we may see a “catch-up” in tomorrow’s report. As for Fed comments, the strength of consumer spending as well as the recent weakness in the US dollar could keep a hawkish bent to the Chairman’s words. A weaker dollar generally boosts inflationary pressures and given that inflation is the central bank’s number one concern at the moment, it is unlikely that they will probably want to talk the US dollar down even further. Moskow will also be speaking and he is usually a very aggressive hawk who tends to favor tighter monetary policy. Therefore a bounce is very possible tomorrow even though from a longer term perspective, the factors that have pressured the US dollar lower are still here to stay.

Aussie: Correction time?
There is no doubt the fundamental backdrop suggests the dollar can go lower, much lower. But near-term, you know that, I know that, and the proverbial shoe-shine knows that, based on the fact that it’s headline material everywhere. That usually means correction time.

Our favorite for playing a correction at these levels is the Aussie dollar—technically it appears extremely extended. Australia disappointed the market with news that home-building approvals dropped:

“Dec. 4 (Bloomberg) – The Australian dollar dropped after a government report showed home-building approvals fell in October.
“The number of approvals to build or renovate houses and apartments fell 7.4 percent from September to 12,214, the Bureau of Statistics said today in Sydney.
The median estimate of 23 economists surveyed by Bloomberg News was for a 1.5 percent drop.”
This could be a good excuse for “profit taking.”Jack Crooks